b 6 FILE COPY REPURLIC OF THE Pm arpnves COMMISSION ON AUDIT NATIONAL GOVERNMENT AUDIT SECTOR Cluster 7 — Public Works, Transport and Energy Department of Transportation 2~ Audit Group D PHILIPPINE COAST GUARD 19928 sre Port Area, Mala Tel No 8527-9860 AS77819 le 62D] Office of the Auditor ~ Audit Team No, NCR-O4 AOM No. : CAS 2022-004 (2022) Date June 29, 2022 AUDIT OBSERVATION MEMORANDUM (AOM) For: ADM ARTEMIO M ABU Commandant Philippine Coast Guard (PCG) Port Area, Manila Attention: RADM ROBERT N PATRIMONIO. Commander, Marine Environmental Protection Command CAPT RICHARD Q PARAGAS Deputy Chief of Coast Guard Staff for Comptrollership, CG-6 COMMO ARMANDO A BALILO Commander, Coast Guard Intemal Audit ALL CONCERNED PETTY CASH CUSTODIANS, Subject: Lapses’Deficiencies in the handling of Petty Cash Funds of the MEPCOM Headquarters (HMEPCOM), National Operation Center for Oil Pollution (NOCOP) and Marine Environment Protection Institute (MEPTI) We have conducted cash examinations on the accountabilities of the Petty Cash Fund Custodians (PCFCs) of the Philippine Coast Guard - Marine Environmental Protection Command (PCG-MEPCOM), specifically for the HMEPCOM, NOCOP and MEPTI, on June 06, 2022, and noted the following: (A) The petty cash funds were used for payment of meals during meetings and semi- ‘expendable machinery and equipment with total cost of P65,897.33, which is not in keeping with its intended purpose, in violation of COA Circular No. 97-002 dated February 10, 1997. Furthermore, there was no existing policy/guidelines ‘on the allowable cost of meals/snacks during meetings. 1. As of June 06, 2022, the MEPCOM has three (3) Accountable Officers (AOs) who were authorized to handle the petty cash funds for the operating expenses of HMEPCOM, NOCOP and MEPTI, as shown in the next page.~ o a Name of Accountable Officers Office ae a ee ee 1._CG ENS Jersome L, Estioko HMEPCOM 150,000.00, CG PO2 Rea G. Divinagraci NOCOP: 100,000.00 3_CGPO2 Kelvin. Acuin MEPTT t 50,000.00, aes item Provisions of COA Ciralar No, 97-002 ded February 10,197, which ash hen amends the rues and regulations onthe granting, utzaion and ligadaticn of cash advances for petty operating expenses areas follows 4:1 Regular cash advances are thase granted to cashiers, disbursing officers paymasters, and/or property‘supply afjicers for any of the following Purposes: 4 Pety operaing expenses consisting of small payments for mainienance and operating expenses which cannot be paid conveniently by check or are required to be paid immediately. 432 The cash advance shall not be used for payment or regular expenses, such as rentals, subscriptions, light and water and the like. 208 3. Review ofthe PCF replenishment vouchers disclosed the following expenditures: 5 Rocor [MErni [Ta peau Amounts in Pesos ‘Meals Expenses 2651933 9,584.00 36,403.33 Semi-Expendable 20,899.00 8,595.00 29,494.00 Equipment ([Torat 47,7183 18,179.00 BOIS 4. {38 can be gleaned fiom the foregoing table, a total of P36,403,33 or 24.27% of the total PCFs of NOCOP and MEPTI were disbursed forthe payment of meals served during the conduct of regular meetings of MEPCOM personnel, 3. _, It was informed that in NOCOP, a Memorandum dated January 20, 2022 was issued for the conduct of weekly assessment every Monday moming for their weekly planning and for programs to organize, develop and assist each personnel with regards ty their respective roles and for them to effectively perform their respective functions sx NOCOP. In the conduct of mestings, meals are regularly served notwithstanding the fact that issues and concems being discussed pertain to regular functions ofthe personnel and the provision for snacks may not be necessary, © erie 2d: it was informed that PCG does not have an existing policy or internal fuidelines on the allowable amount per pax for meals and snacks to ensure prudence in government spending of funds and uniformity in all branches/offices of the PCG 7. The Audit Team also noted that PCFS were used to purchase the following equipment which should have been included in the Annual Procurement Plan (APP) of the AOM NO. 2022- 004 (2022) Page 2 of 9er 6 Agency and coursed thru the emment Procurement Procurement modes presrbed in RA No. 9184 he Office Particulars Payee ere Wo (Ga Pesos) _| XCOP_| Brother Printer OCP-T420W | Tech Dapot LT. Works 9300.00 Solutions, Ine Resini Note 10S0N Blue | Xiaomi Gratin C Ba jue | Xiaomi Grimalink Corporation 1759900 ‘MEPTi | Washing Machine Star Appliance Center 8,595.00 otal Eres ee AON 8. We recommend that PCG — MEPCOM: (a) avoid the use ofthe PCF for the Payment of meals for meetings and follow the proper procurement process for Activities that require the serving of meals with emphasis on the proper utilization oF fands and prudence in spending government funds; (D) consider recommending 1 the PCG Management forthe crafting of internal guidelines onthe provision of mens fand snacks during meetings. for uniformity in application across all PCC branchesiafices; and (e stop the use of PCF in the procurement of equipment which fan be done thru regular, modes of procurement prescribed in RA No. S164 Further, we recommend that the Inventory Custodian Slips (ICSs) issued ts itclnowledgement for the semi-expendable equipment purchased be submitted to the ‘Audit Team for verification purposes. (B) Disbursements out of the Peny Cash Funds were made without complete and ‘proper documentation, contrary o Section 4 (6) of Presidential Decree 1445 (Ph TUES) and Section 35(a), Chapter 6 of the Government Accounting, Manual (GAM) Volume | thus, th valaity and regularity ofthe expenditures amounting fo P42,816.75 could not be fully established. 9. Section 4(6) of PD 1445 provides that claims against goverment funds shall be supported with complete documentation. 10. Likewise, Section 35(a), Chapter 6 of GAM Volume I states that “All ceoursements out of PCE shall Be covered by dhly accomplished and approved PCY. supported by cash mvoices, ORs or other evidence of disursements.” 11, Verification of the cash items presented during the cash count on the PCFC of MEPCOM-NOCOP agaregating to 34,574.00 revealed that the Petty Cash Vouchers (PCV) and their supporting documents such as Purchase Request, Canvass of Prices for Mavetals/Supplies/Pans, Abstract of Bids and Recommendation of Award, Inspection and ‘Acceptance Report, Certificate of Emergency Purchase! Repair! Service and Notice of ‘Mowing were not signed or approved by the authorized signatories, contrary tothe above- stated provisions of 35(a), Chapter 6 of GAM Volume I 12. Onthe other hand, only the Official Receipts and Sales Invoices were presented by the AO during the cash count in MEPCOM-MEPTI, The duly accomplished and approved CVs as well a the other documentary requirements forthe liquidation of PCF were not attached to support the payment of expenses aggregating to P8,242.75 which were charged against the PCF. ‘AOM NO, 2022-008 2022) Page 3 0f94 4 13, The PCEC concemed informed that it has been their practice to prepare and complete the necessary supporting documents for the PCF transactions, including approved PCVs, only when replenishment is needed, which is not in keeping with the aforementioned rules and regulations. 14. {tis worthy to note that PCVs sould be prepared by the requesting party every time there is petty cash disbursement to ensure propriety and validity ofthe expenses. The absence of approved PCVS and their supporting documents may raise doubts on the validity and regularity ofthe payments made out ofthe PCF. 1S, We recommend that the PCG-MEPCOM direct their Petty Cash Fund Custodians to submit complete documentations to support all transactions paid out ‘of the PCFs to ensure the validity and regularity of the payments. Henceforth, ensure that PCVs are properly approved prior to the release of funds out of the PCs, (©) Petty cash fund granted to PCFC was more than the two months recurring expenses of the office, contrary t Section 40, Chapter 6 of GAM Volume I and Section 4.3.1 Of COA Circular No, 97-002 dated February 10, 1997, thereby, resulting in large ‘amount of idle PCF which exposes government funds to risk of loss or misuse. 16. Section 40, Chapter 6 of GAM Volume I provides that Government Units without complete set of books of accounts may be granted cash advance covering wo months ating requirements for authorized petty and other miscellaneous expenses to finance sp operations. XXX 17. Section 43.1 of COA Circular No. 97-002 dated February 10, 1997 states that “The Accoumable Officer may request replenishment of the cash advance when disbursements reach at least 75 percent, or as the need requires, by submitting a replenishment voucher with all supporting documents duly sunmarized in a report of disbursements.” 18, An analysis of the Petty Cash Fund Records disclosed that the PCF granted to PCFC of MEPTI was more than two months recurring expenses of te office. As shown, it took more then 2 years before the disbursement reached 76% of PCF, to wit Persea of rer ‘spenement ue | terns | Period Covered | Repenied | HoldingPeriod | “aver PCF Sount scout 2 “Bito—| CODAP Ra OE | CITT | 700A | Toma | — Te a ioaan aroaT | EBBAPNG OF [Toa TTT | Tear isa] Sao | xm | |v [Sei | EODAP Noe | ourvamat we | Ta9t@ |= a ee “a owatna1 Toa | LODAP a OF | oazranal | aes | Soa a0 Tati031 ge Subsea] SRRTEIS | years Sens nd’ | 70 Hage STAGE] TODARE TT | DAV] RTS | Ta aa a [ ise | “ana Eee ‘AOM NO, 2022- 004 (2022) Page 40f9| ie = Sy a ee ee, a oi 7 It cam be gleaned from the above table that the disbursement rate of the PCF was very low and the expenses were made mostly during the lockdowns due to the COVID-19 pandemic, However, it was observed in CY 2022 that a large amount of PCF was idle in the hands of PCFC witch exposes government fund to risk of loss or misuse 20, __ We recommend that the PCG-MEPCOM reduce the amount of the PCF for MEPTI to an amount sufficient to pay the recurring/petty expenses for two months £0 avoid idle funds in the custody of the PCFC. (D) Non-maintenance of forms prescribed in Appendix $1 of GAM Volume It for ‘monitoring and liquidation of PCF 21, ‘The instructions for the use of the PCF Register or Appendix 51 of GAM Volume 1 provides that the PCF Register shall be maintained by the PCFC of Government Units ‘without complete set of books of accounts to monitor/summarize the Petty Cash Fund (PCF) established/teplenished and the disbursements charged thereto. 22, Also, see. 63 of COA Circular No, 97-002 dated February 10, 1997 states that: “The AO shall reconcile the book balance with the cash on hand daily, He shall foot and close the books atthe end of each month. The ‘AO and the Accountant shall reconcile their Books of account atleast quarterly.” 2B, However, it was observed during the conduct of cash count and review of the PCFs ‘eplenishments that the PCFCs maintained PCFs Record for monitoring and liquidation of PCFS instead of PCFs Register considering that the NOCOP and MEPTI do not have complete set of books of accounts. Further, it was also observed that the Cashbooks presented by the AOs were not updated, thus, indicating thatthe daly transactions were ‘not monitored, recorded and reconciled immediately. 24, The non-maintenance of presribed forms in the monitoring of PCFs could affect the proper recording and classification ofthe expenses paid out of the PCFS. Hence, the PCF register should be used instead of PCF Record since the said report encompass more details a to the breakdown of payments which is necessary for recording purposes for those offices without complete set of books of accounts 25, We recommend that the PCG-MEPCOM require the concerned PCFCs to prepare PCF register instead of the PCF Records pursuant to Appendix S1 of GAM. Volume I ‘AOM NO, 2022. 004 (2022) Page 5 0f9é d (E) Spliaing of transactions in the expenses paid out of PCF 26. Sec. 38.a, Chapter 6, Volume 1 of GAM also a . . provides that “Payments out of PCF, which shall be made through a Pety Cash Voucher (PCV), should be allowed ony fr DOU a ing P15,000 for each transaction, except when a higher amount i allowed by law and/or specific authority by the COA. Splitting of transactions to avoid exceeding the ceiling shall not be allowed,” = 27. During the examination of the Offical Recits supporting the liquidation of FCF of NOCOP, two transactions whose total amount exceeded the threshold of P15,000.00 as. set forth in the above-stated provision were observed and which indicate splitting of transactions, to wit OR Payee = = Amount Remarks RON-JAYS HARDWARE 3uist_| May 23, 2023 15,570.00 | Roof repair of RON-JAY'S HARDWARE. 50185 | May 23,2022 “4.845.00 | NOCOP Otfice ‘TOTAL. 19,465.00 | 28. We recommend that the PCG-MEPCOM Management avoid the use of PCF in the payment of goods and services exceeding the threshold of P15,000.00. (B) The Fidelity Bond of the AO was not renewed on time 29. Section 101 of PD 1445 provides the following: “1, Every officer of any government agency whose duties permit or require the possession or custody of government funds or property shall be accountable ‘therefore and for the safekeeping thereof in conformity with law. 2. Bvery Accountable Officer shall be properly bonded in accordance with aw." 30, Section 7.2 of Treasury Circular No. 02-2009 dated June 6, 2009 states that: “The fidelity bond of an Accountable Officer shall be renewed before the expiration of the bond. The application for renewal of bond shall be ‘accomplished by using General Form 574.” 31. Our verification disclosed that per Risk No. D1B-19-04-0341, The PCFC of MEPTI is bonded from April 17, 2019 until April 17, 2020. Subsequently, the bond was, renewed per Risk No DIE-21-08-2320 effective August 27.2021 to August 27, 2022. It ‘can be noted that the PCFC is not bonded from April 18, 2020 to August 26, 2021 despite tninterrupted fimetion as PCFC as evidenced by the PCF Records forthe said period. 32. We are concerned that if the bond of the AO is not regularly renewed on time as prescribed in the foregoing regulations, the government may not be fully indemnified in case of defalcation, shortage or unrelieved loss 33, On the other hand, it was observed that CG ENS Jersome L. Estioko who was designated as Petty Cash Fund Custodian of HMEPCOM through NHQ-PCG Special AOM NO. 2022- 004 (2022) Page 60f9‘Order No. 250 dated December 20, 2021 have not , Yet established his authorized Sh fund of up to P150, Brea 0 Teaser BT) 0009 due to non-bonding of his required fidelity at the Bureau of 34. the Audit Team was informed that the documentary requirements were ready and complete, however, due to the new Online Fidelity Bonding System (OFBS) of the BTr, it caused delays in the approving of his online application. It is worthy to mention that on March 28, 2022, PCG - Finance issued an unnumbered Memorandum on the decentralization of the process, activation and approval of bond application of accountable Dublic officers which delegated the role of Approver to the respective Commanders ofthe Districts, Offices and Units instead of the PCG Commandant. 35. Upon evaluation of Mr. Estioko’s user enrollment form, the approver was still the PCG Commandant instead of the MEPCOM Commanders which was not updated by the ssignted Admin of PCG-OFBS, thereby causing delays in the application of fidelity 0 36. We recommend that the PCG - MEPCOM Management instruct the PCEC of MEPTI to regularly monitor the validity of his bond and ensure its renewal before its expiration in accordance with Annex C of Treasury Circular No. 02-2009 on the bonding of public officers; and fast track the application of Mr. Estioko’s fidelity bond by updating the approver of the OF BS of MEPCOM. (G) Disbursements totaling P37,881.00 were incurred earlier than the granting of the petty cash fund 37. In the post-audit of replenishment vouchers, it was noted that expenses of NOCOP ‘totaling P37,881,00 were incurred from March 2, 2022 to April 4, 2022, which were earlier than the establishment of the petty cash find on April 6, 2022. 38 _ According tothe concerned AO, during the time when her petty cash fund was not yet released, the logistics officers would disburse using their own money for ther office's needs pending receipt of the petty cash fund, Afterwards, when she received her petty cash find on the aftemoon of April 6, 2022, she reimbursed the expenses which were previously paid by her officemates and then prepared all the Petty Cash Vouchers dated ‘April 7, 2022 for the reimbursement. 39, The AO claimed that she sought guidance from the PCG Finanee Division on the Said practice and she was advised that itis allowed to reimburse expenses paid from the date ofthe Special Order as a PCFC which was January 11, 2022 40. Since the said expenses were incurred prior to the establishment of the PCF, they should have been paid/reimbursed through the regular disbursement process or the issuance of a check/LDDAP-ADA instead of the petty cash fund, 41, We recommend that the PCG-MEPCOM, henceforth, direct the concerned PCEC of the NOCOP to ensure that no disbursement earlier than the release of fund shall be charged against the PCF. AOM NO. 2022- 004 (2022) Page 7 of9(i Erroneous accounting treament of PCF 42. See. 35, Volume of GAM under the impre : Provides thatthe Fan and ec Lal ines, the Pty Cash Fund hal Be equ te tl ah ok expenses, 43. Review of the D’ Vs and replenishment.of the oe rath fllowing aecounting entries forthe establishment PCF of NocoP: Ret DVNe I Account Title Debit | Credit_| Dy No 22.05. [Rey Ca Find 700,000.00, Ss g Casi-MIDS, Regular 100,000.00 'oexablish the petty cash fn DY No. 22-05. | ety Csi Find WUETS zi eh aed Nay Cash-MDS, Regular 40,034.13 Ta replenish the pety cash fond | 44. ‘The accounting entry to record the replenishments of PCF was improper which resulted in the understatement of Expenses and an overstatement ofthe Petty Cash Fund ‘amounting to P40,034.13, The expenses paid out of the PCF should have been charged oF debited instead of the PCF. 45. We recommend that the Accounting Service Office (ASO) of the PCC jrepares the necessary adjusting entries to correct the mistatement in the recording of PCF replenishments. May we have your comments on the foregoing audit observations both ip hard and five (5) calendar days from receipt hereof. You may email it 10 “Audit Team Leader ‘Special Audit Team | - MEPCOM e-copi con auditomes yahoo.com es CECILIA E, BERNALES Supervising Auditor Philippine Coast Guard Aut Group D= DOTr 2 ‘AOM NO. 2022- 004 (2022) Page 8 of9wv Proof of Receipt of AOM. Name Position a ‘ADM ARTEMIOM'ABU | Commandant eG sao Rn sel Lavoro RADM ROBERT Commander MEPCOM PATRIMONIO Teh Gatto CAPTRICHARD@ Doputy Chica Coast Gard as PARAGAS SulTor Compuallenip, CO.6 | Le PESQgA oy pa30/ ily 1 SOMO ‘ARMANDO A ‘Commander, CGIA MALE Ounce CG PO REAG ety, Cah Fund Cason 5 a DIVINAGRACIA NOCOP, ps Lisakeae fg CGPOSKELVINT ACUN ey Ca Fund Coda Leh nd ian antsy COENS enone. esi Cash Fand Casa Nib, male coe HNercone w& ATA WHF te AOM NO. 2022- 004 (2022) Page 9 of9